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The reliability of valuation data
The reliability of data used as an input into a valuation can have significant effect on its quality.
In assessing the reliability of the technical valuation data used by the valuer, the ATO will consider whether the valuer has:
- critically evaluated the data and any other information provided by the taxpayer, or otherwise obtained
- undertaken suitable checks, enquiries, analysis and verification procedures to ensure the integrity of the data. For example, where an inspection of a material petroleum asset or title is likely to reveal information or data that is material to a valuation report, good practice would require that the valuer inspect the asset
- provided specific and definite material assumptions
- considered changes in assumptions that are likely to materially impact on the valuation, for example, changes in the commodity price, exchange rate and inflation rate
- applied reasonable grounds in the preparation of any forward looking information used and, if such information has been provided to them, that they have made sufficient enquiries to ensure it was prepared on a reasonable basis.
The ATO recognises that in-house expertise may be best placed to process and compile the technical valuation data.
The documentation of the information and data relied upon in the valuation of starting base assets will assist the ATO in a review of the valuation. This should include the reasons why the valuer relied upon such information and data, and any adjustments made to reflect reliability issues.
The ATO recognises that the purpose of the valuation is to estimate the market value. Due to the complexity of valuations, there will be a range within which the true market value of that asset lies. The ATO understands that a value chosen from within a range is dependent on the facts and circumstances specific to that valuation. The ATO expects where a value is chosen from within a range, that records show how the choice was made.
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The valuation report should contain sufficient information about the data and valuation methods used so the ATO can understand the procedures used and replicate the valuation, if required. For more information on record keeping, see Record keeping for starting base.
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